Late last year I was chatting to a VC about Fab.com. He was just shaking his head. Why the scepticism, I asked? “Look, I just can’t see how it’s sustainable. They’ve raised an awful lot of money, but flash sales are just going to burn them to death.” And sure enough today has come an announcement from Fab that “Starting today, Fab is no longer sending daily flash-sales emails.” These changes begin rolling out on Fab Europe at 8am CET today and then in Fab North America at 8am ET, according to CEO Jason Goldberg in a blog post today.
Since Flash sales are about pushing out bargains, this is only sustainable as long as you can keep raising money (see Groupon for experience in that). It’s in premium goods that the real value lies – and the audience that goes for them. The fact that they have switched to this follow model suggests that Fab they may now be big enough to sustain that premium focus instead of the scattergun Flash sales approach. That said Fab is still raising more money, has 14m+ active users as of June and is growing margins on purchases, now above 43%.
Instead, the company is introducing a Twitter-like “Follow” model, whereby users simply follow the designer stuff they like. Did I say Twitter? Indeed, this looks more like Pinterest – but where Pinterest doesn’t deliver the goods, Fab will.
Fab says the site will now start to personalise the on-site experience based on this data and will only send notifications “when there are new arrivals of the stuff you follow.”
Fab’s customers will start of by being able to follow departments (like Furniture). Shortly thereafter they will be able to follow designers and specific topics (like photography).
The same changes will be coming to iPhone, iPad, and Android “soon”.
As we noted in June, Fab said that most of its revenue is not derived from flash sales, which was the initial model Fab adopted after its pivot in 2011.
According to the company in June, Fab should reach $250 million in 2013 sales.
The company last raised raised $150 million in the first tranche of the company’s Series D round of financing, which brought Fab’s total funding to $310 million.